TOBBACO CONSUMPTION AND HOUSEHOLD WELFARE IN NIGERIA

Abstract

Tobacco consumption has been associated with chronic health conditions and deterioration in household welfare. Consequently, the efforts at mitigating its impact is global. Previous national and sub-population epidemiologic studies have provided evidence that suggests that there is an increasing level of tobacco consumption in Nigeria with little attention paid to investigating the welfare effects of tobacco consumption in the country. Therefore, this study was designed to assess the impact of tobacco use on household welfare in Nigeria.

Neoclassical Theory of Consumer Choice (NTCC) served as framework. The NTCC relates household welfare/utility to the consumption of goods and services, subject to households’ budget constraint. Following this, the consumption of basic goods and the risk of incurring Catastrophic Health Expenditures (CHE) were used as indicators of household welfare. The Harmonised Nigeria Living Standards Survey of 2009/10 was utilised. Quadratic Almost Ideal Demand System, which provides empirical approximation for the NTCC were specified for tobacco budget share and unit value. National, rural and urban price elasticities of tobacco demand were estimated using within and between clusters variation in prices and quantities demanded. Budget share equations, which controlled for price effects and household size (equivalence scale), were calibrated for household consumption of goods and services (food, education, clothing, health, energy, transportation, recreational activities, and communication). Households were stratified using their tobacco consumption status and households with total health expenditure above 40% of its total non-food expenditure or capacity-to-pay were adjudged to have incurred CHE. Health expenditure models were estimated and excess healthcare spending and risk of CHE attributable to tobacco consumption were predicted. Seemingly Unrelated Regression was used to estimate the impact of tobacco consumption on household welfare. All estimates were validated at α≤ 0.05.

Household size, cluster effects, education, and income significantly influenced tobacco consumption among households in Nigeria. The price elasticity of tobacco demand in the national sample was -0.62. Also, rural and urban price elasticities of tobacco demand were -0.63 and -0.49, respectively. In all samples, price elasticity of demand for tobacco was fairly inelastic. Tobacco consumption significantly crowded out the consumption of household goods such as vegetables, fruit, and milk (-0.0102), clothing (-0.0139), communication (-0.0015), and education (-0.0032). However, there was complementarity between tobacco consumption, transportation (0.0040), recreational activities (0.0074) and health (0.0067). On average, tobacco consumption increased health expenditure by 32.9%. Similarly, smoking households residing in rural settings incurred a higher burden of CHE by 3.11%. For all households with a member or members who consumed tobacco, excess medical spending attributable to tobacco consumption increased the CHE by 2.57%.

Tobacco use had impact on the consumption of some basic/essential household commodities and increased the risk of catastrophic health expenditure in Nigeria. Households can enhance their welfare by diverting the portion of their resources spent on tobacco consumption to consume other basic household goods.